Correlation Between Vanguard Total and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Dimensional ETF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Total and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Stock and Dimensional ETF Trust, you can compare the effects of market volatilities on Vanguard Total and Dimensional ETF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Total with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Dimensional ETF.
Diversification Opportunities for Vanguard Total and Dimensional ETF
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Dimensional is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and Vanguard Total is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Total Stock are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Vanguard Total i.e., Vanguard Total and Dimensional ETF go up and down completely randomly.
Pair Corralation between Vanguard Total and Dimensional ETF
Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 2.23 times more return on investment than Dimensional ETF. However, Vanguard Total is 2.23 times more volatile than Dimensional ETF Trust. It trades about 0.17 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.08 per unit of risk. If you would invest 21,242 in Vanguard Total Stock on September 1, 2024 and sell it today you would earn a total of 8,744 from holding Vanguard Total Stock or generate 41.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Stock vs. Dimensional ETF Trust
Performance |
| Timeline |
| Vanguard Total Stock |
| Dimensional ETF Trust |
Vanguard Total and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Dimensional ETF
The main advantage of trading using opposite Vanguard Total and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Dimensional ETF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.| Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Real Estate | Vanguard Total vs. Vanguard Total Bond |
| Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional ETF Trust | Dimensional ETF vs. Dimensional Core Equity |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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